Peak District Rural Housing Association BUSINESS PLAN 2018/ /23. Tel: Fax: Website:

Transcription

1 Peak District Rural Housing Association BUSINESS PLAN 2018/ /23 Tel: Fax: Website:

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3 PEAK DISTRICT RURAL HOUSING ASSOCIATION BUSINESS PLAN 2018/2019 TO 2022/2023 Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 INTRODUCTION TO THE BUSINESS PLAN AND MISSION STATEMENT SUMMARY OF AIMS AND OBJECTIVES THE OPERATING ENVIRONMENT AND EXTERNAL CONSIDERATIONS (INCLUDING SWOT ANALYSIS) CURRENT ACTIVITIES AND STRATEGIC FOCUS FINANCIAL PROJECTIONS FOR THE PLAN PERIOD APPENDICES 1. Board Membership and Structure 2. Stock Profile 3. PDRHA Operational Risks 4. Glossary 1

4 Item 1 INTRODUCTION TO THE BUSINESS PLAN AND MISSION STATEMENT The mission of PDRHA can be summarised as follows: PDRHA exists to provide affordable housing within rural Peak District. We work closely with District Authorities and Parish Councils in order to ensure that our developments meet the needs of local people who cannot access housing in their communities. At the beginning of the plan period Peak District Rural Housing Association managed 266 homes, with proposals for a further 48 dwellings in the pipeline during the plan period. Despite the challenging economic and fiscal environment, we remain encouraged by the fact that growth is continuing, and our vision is being realised. We continue to be supported by a range of partners, particularly Parish Councils, the Peak District National Park Authority, Local Authorities, Homes England, and Midlands Rural Housing, and we will to continue to build on this valued support throughout the plan period. We will also look to engage with Local Enterprise Partnerships and any emerging devolution structures, including any Combined Authority arrangements. This Business Plan takes into account the significant changes affecting affordable housing particularly the impacts resulting from the re-focusing of capital subsidy, rent control, implementation of welfare reforms and Government policy directives. At the same time we are determined not to lose sight of our primary objectives of providing affordable, attractive, well managed homes for local people within the villages of Peak District; securing improved services for our residents; and contributing to the sustainability of the rural communities. This Business Plan sets out the way ahead for achieving our aims, and how the emerging challenges will be addressed, and will be subject to annual review. 2

5 Item 2 SUMMARY OF AIMS AND OBJECTIVES The purpose of this Document is to set out the objectives and financial plans of the Association for the period 2018/ /2023. Throughout this period we will continue to pursue our stated mission. The Plan sets out the methodology by which we will do this, and how we will gain the support to do so while maintaining our financial viability. At the same time, the Association will continue to provide high quality services to its customers. In this context, our policies will remain resident focussed and geared to local aspirations. We will continue the core business of providing new homes for the benefit of local people and rural communities. Such growth will continue to be achieved organically, and will be influenced by evidenced needs. We will look for opportunities to expand the number of homes in management by working with other organisations and promoting ourselves as a specialist manager of rural housing. However, this role will only be pursued where it is viable in financial terms, has strategic value, and where our management expertise brings tangible benefits to residents. We will continue to maintain our stock in good condition and our Asset Management Strategy will be consistent with this objective. We will also undertake improvements to our existing stock, with an emphasis on achieving affordable running costs for residents, and defining our sustainability aspirations. Sound financial management is vital across all our operations, particularly in a period of rent reductions. We will increase the investment of our own resources into the delivery of new homes to achieve our key objectives, but will continue to maintain our viability. The plan will ensure that required surpluses, and key financial ratios are achieved. We will also meet any revised regulatory requirements set by the Regulator of Social Housing, and periodically review our compliance with the latest NHF Code of Governance. The Board of Management is fully aware of the challenging environment in which we operate, and feels that the plan represents a sound basis on which to progress during the coming five years. 3

6 Item 3 THE OPERATING ENVIRONMENT AND EXTERNAL CONSIDERATIONS (INCLUDING PEST AND SWOT ANALYSIS) KEY ISSUES AND RISKS The Association s expectation is that the operating environment will continue to be challenging, and will cover a period of significant fiscal constraint. In particular, the plan will cover the period of the UK exit from the European Union, and it is recognised that this is likely to dominate the political and economic environment for the foreseeable future. This will present risks and opportunities for the sector, but it is difficult to say with any accuracy what the impact will be on the PDRHA business. As a consequence, this plan concerns itself with the current focus of the business and addressing the tangible challenges that are presenting themselves. In particular, it is anticipated the following areas will have a direct impact on the operations of PDRHA, and the delivery of its objectives, and will need to be monitored and reviewed over the period of the Plan. 1. The Voluntary Right to Buy Despite indications to the contrary, the Government has continued to promote its manifesto commitment to extend the Right to Buy to housing association tenants via the launch of a pilot project across the Midlands. Agreements between Government and the NHF enable this to be progressed on a voluntary arrangement and will enable discretion on what homes providers will sell. In determining its policy position, it needs to be recognised that the majority of NRHA s stock has been developed utilising the Exceptions approach, with planning granted on the basis that the homes will be retained for local people in perpetuity, which is enshrined in legally binding S106 agreements or covenants. The voluntary deal acknowledges that rural locations present specific issues, and there can be no expectation to sell homes that have been provided on this basis. The pilot project is intended to test further elements of the VRTB proposals, including the application of portable discount. However, there is recognition by MHCLG and the NHF that there are practical barriers for smaller providers, particularly rural housing associations, who would find it very difficult to offer tenants any reasonable porting 4

7 opportunity. Given this, the expectation is that larger housing associations (those with over 1,000 homes) would engage with the pilot, but there is no obligation on smaller providers to take part.. In addition, it is a mandatory term of the pilot scheme that all qualifying tenants who are unable to buy their current home must be offered portability. As a consequence, the Association has decided to opt out of the pilot project. 2. Reductions and future Control The Government has maintained its directive that social housing rents across England will reduce by 1% a year until This will apply to both social and Affordable s. Such a rent reduction will impact on income streams, and cash flow during the early plan period. The financial projections included in this plan have been modelled to take this into account. These continue to show surpluses being created and financial covenants being achieved. The Government has confirmed a return to a rent review mechanism of CPI +1% in 2020/21 in accordance with initial announcements. However, the Association has taken a cautious approach to its financial planning and based its projections for the immediate post 2020 period on a modest increase scenario. In practical terms, close financial management will be required over the plan period, and the financial projections will be subject to stress testing moving forward. 3. Relationships with Partner Housing Associations PDRHA remains committed to working in partnership with other Housing Associations, particularly in the context of Development, where there is still a requirement to engage others to absorb risks associated with this activity. The Plan assumes that such arrangements will be maintained, and that we will partner with housing associations who will look to secure subsidy in one form or another. That said, the Association recognises that the development capacity of mainstream providers is being affected by reducing incomes. This, in turn, could result in some providers being unable to take on additional schemes and provide development agency services. This will need to be monitored over the plan period, and it may be necessary for PDRHA to identify new partners for programme delivery. 4. The Devolution Agenda The Government devolution agenda continues to be promoted, with an increasing role for Local Enterprise Partnerships, and Combined 5

8 Authorities acting as investment vehicles, which in many cases, includes a housing growth remit. This is part of the Government s commitment to devolve the powers and budgets of public bodies to the local level. This has the potential to lead to increased integration of funding streams, including those for housing delivery. As a consequence, PDRHA will need to identify opportunities to engage with any Combined Authority arrangements in its area of operation. Such structures will undoubtedly have an increasing role as strategic influencers and funding bodies moving forward. 5. Funding priorities and future investment Despite the welcome increase in investment for affordable housing, the current level of public investment targeted at new rural housing is limited. That said, PDRHA has a modest development programme, which will be supported by Social Housing Grant via Homes England and Local Authority partners. The funding flexibility offered in the Autumn Statement presents opportunities to bring forward additional schemes. The Association is, therefore, actively considering bids for further development as part of the enhanced Continuous Market Engagement programme announced by Homes England. It is recognised there will still be reliance on other forms of funding, particularly that from Local Authority partners. There will also be an ongoing need to consider alternative funding solutions and models to maintain delivery of rented homes this includes cross-subsidy, sourcing alternative funding and increased use of the Association s own resources. The Association holds some recycled capital grant in its accounts. These funds are from the receipts from staircasing by shared owners and from the disposal of two problematic properties. The association is negotiating with a number of developers in Derbyshire Dales who have planning approval to build schemes on the basis that they provide a number of affordable homes. 5 such schemes are planned to complete within the plan period. Opportunities to access funding for Community Led projects will also be explored, although it is recognised that such funding is limited across the area of operation at present. In terms of the Association s investment, it is acknowledged that this will need to increase, and its assets will need to be effectively managed for this purpose. 6

9 6. Regulation and Governance The current regulatory framework is primarily concerned with ensuring social housing assets are protected, and investment in new supply is encouraged. Managing risk to ensure that both elements can be delivered is crucial. This requires effective governance to manage the Association s resources; ensure financial viability is not compromised; and the impact of its activities on the business are clearly understood. PDRHA will periodically assess, and test, compliance with the regulatory framework, which is likely to be modified following the establishment of the new Regulator for Social Housing. However, it should be acknowledged that the business is not exposed to the wider commercial risks that affect some larger providers given that the Association is solely concerned with meeting rural needs through the provision of general needs affordable housing. Therefore, the Association does not anticipate any compliance issues in relation to asset protection. As it currently stands, the current regulatory engagement for PDRHA is minimal on the basis that it does not open itself up to significant risk, and remains below the 1,000 unit regulatory threshold. However, as the operating environment becomes more challenging, the new regulator is likely to take a risk-based approach to regulation which could bring smaller providers under closer scrutiny. This is already being demonstrated with regard to data collection, and will need to be monitored as the framework evolves. PDRHA has continued to adopt the National Housing Federation Code as its governance model, and will periodically test compliance to ensure the requirements of the code are met. 7. Climate Change and Renewable Technologies The Association has taken the view that the focus on the existing stock will increase, particularly with regard to energy efficiency and limitations on carbon dioxide omissions. We have a strong commitment to address these issues, and future budgets will need to be set to enable investment in such measures. Additionally, we recognise there is an obligation to our residents to improve environmental standards in our stock and reduce the potential for fuel poverty. With this in mind, the Association will look to balance future investment in renewable technologies to ensure the benefits are passed on to existing residents as well as those occupying new developments. The first stage in this process will be the development of a heating system replacement strategy which will initially consider the options for off-gas properties. 7

10 The Association is committed to gaining increased experience and learning, and will engage with its partner rural housing association in Warwickshire, which is embarking on an exemplar Passivhaus development. 8. Private Finance and Borrowing Lenders continue to take a more commercial view of the sector, and margins are set to reflect this, and the risks associated with income restrictions. This will impact on future PDRHA borrowings, and will shape the assumptions factored into financial planning. In line with the adopted Treasury Management Strategy, PDRHA will move towards facility arrangements to make the best use of its assets for borrowing purposes. Refinancing or extending existing loan portfolios to secure further borrowing headroom will be actively pursued, which will be supported with reference to the Asset and Liability Register. In taking this approach, the Association acknowledges that there are a limited number of lenders in the market, and that increasingly commercial terms will be applied. However, cautious assumptions have been used in the development of the 5 year financial plan, which confirm that such an approach can be accommodated from a viability perspective. Alongside the wider long-term borrowing concerns, there remains a limited range of products available to purchasers of Shared Ownership homes, which is still compounded by high deposit requirements. This continues to pose a disincentive to develop shared ownership products. The model shared ownership lease, introduced as part of the Protected Area Status, has alleviated some of these concerns by allowing leaseholders to purchase 100% of the equity in their property. Nonetheless, at the present time sales risks remain, and PDRHA will continue with its approach of only providing shared ownership homes where a clear demand can be evidenced, and homes meet the affordability criteria. 9. Changes to Welfare Benefits The Government has continued implementing its programme of welfare reforms which affects residents, providers and housing authorities. Steps have already been taken to minimise the impact of benefit reductions which has resulted in rent arrears levels being maintained or even reduced. However, this positive trend could be impacted as more benefit recipients are moved on to Universal Credit. In acknowledgement of this, increased resources have been invested in the Housing Management function to ensure minimal impact on the Association s income stream and neighbourhood services. However, the Association is in a position where the number of residents claiming benefit is low when compared to others in the sector. 8

11 (At the point of preparing this plan, around 29% of tenants claim housing benefit.) However, there can be no room for complacency. Significant activity is being undertaken to inform residents of the changes, and a cautious approach has been adopted to financial planning assumptions in order to acknowledge, and anticipate, the growing impact. 10. National Planning Policy Framework The National Planning Policy Framework continues to have an impact on development activities, much of which is positive. The maintenance of and enhancements to the Exceptions policy, and the ability to utilise cross-subsidy from market homes could be beneficial. This approach has not been adopted by our key partners and it is unlikely to be used in the National Park. At the point of preparing this plan, further changes to the NPPF were proposed. These cover a range of areas, including: Clarity of what is determined as sustainable development. A new approach to viability and the soundness of the initial planmaking framework. A new method for the calculation of local housing need. Developing clear land use strategies. Protecting the Green Belt. The possibility of providing entry level housing on exception sites. It will also draw together any written ministerial statements issued since the initial framework publication in Positively, the strong support for Exceptions development in rural areas is retained. However, the wider impact of the proposed changes will be monitored over the plan period, and specific consultation responses will be made as appropriate. 11. Neighbourhood Planning Neighbourhood planning was introduced as part of the Localism Act. It is designed to give local people the power to deliver development in their local communities, providing significant support can be secured this is currently set at 50% of those voting in a local referendum. Increasingly, rural communities are looking to engage with these arrangements, which may present opportunities for the Association, and the potential to act in an advisory/consultancy capacity. The process is bringing forward potential development opportunities where communities have recognised the need for more housing, and are including options in their plans. PDRHA is ideally placed to assist in 9

12 the delivery of this objective whilst providing a commitment to meet local needs, which is often the primary driver for increasing local housing supply. 12. Achieving Value for Money and Business Efficiency The Association will continue to ensure value for money in its activities and operations. Over the plan period it will continue to review its loan portfolio, and release assets via a refinancing programme in order to improve borrowing efficiency and build more homes. It will also competitively procure key elements of planned and cyclical maintenance, in conjunction with larger providers, to achieve increased economies of scale and cost efficiencies. This will all contribute to increasing our investment in new housing supply. Alongside this, a value for money statement will be included in the annual accounts. This will be in accordance with the revised value for money standard introduced by the Regulator for Social Housing for Smaller Housing Associations. During 2017, and in conjunction with its partner Rural Housing Associations, and Midlands Rural Housing, the Association reviewed the staffing resources required to carry out key functions and identified operational cost efficiencies and associated overhead savings which have been implemented. The cost sharing arrangement with partner rural housing associations, in relation to the staff support from Midlands Rural Housing, will continue. This approach has already demonstrated its value from a cost efficiency perspective, while enabling the full range of skills to be secured for the effective running of the business. The Association recognises that the issue of cost efficiencies is a crucial one for the sector, and cannot be avoided during a period of income restrictions. It is against this background that the NHF issued its voluntary code on Mergers, Group Structures and Partnerships. This puts the onus on Boards to ensure organisations operate effectively and efficiently, and that opportunities to do this should be regularly reviewed. In this context, the existing cost sharing arrangement with the partner RHAs is already regarded as a good practice example of a formal partnership arrangement as described in the Code. That said, the Association will not be complacent in identifying further operational efficiencies moving forward. In summary, the Association has recognised that the current operating environment, while raising potential risks, can present opportunities, and will undoubtedly be a key influence on the Association s activities over the plan period. A detailed analysis of the risks identified is 10

13 contained in the Association s Operational Risk Map, which forms an Appendix to this plan. 13. PDRHA PEST and SWOT Analysis As part of the process of identifying the key strengths and weaknesses of the organisation, a PEST and SWOT analysis has been undertaken, the outcomes of which are as follows: (i) PEST POLITICAL Government investment priorities VRTB pilot in the Midlands Welfare Reform Agenda and implementation Sector Reputation with Government Evolving Planning Frameworks Devolution agenda Revised regulatory framework and new regulator Exit from the European Union SOCIOLOGICAL Increased homelessness Demographical and demand changes Scarcity of rented housing Social exclusion Increasing care and support needs Social cohesion Community empowerment Rising customer expectations Ageing population Increasing home ownership aspirations ECONOMICAL Structural deficit/reduced public investment Economic uncertainty Restructure of, and reduction in, public services Inflation/deflation Interest rates, borrowing margins, and availability of finance Access to mortgages Future rent control/ rent reductions Pensions deficit Unemployment + new employment patterns TECHNOLOGICAL Flexible/mobile working Data security/integrity Technology/Broadband exclusion Business continuity Renewable energy/carbon reduction Sustainable/Eco/Passivhaus Homes Social networking/media Modern methods of construction (MMC) 11

14 (ii) SWOT STRENGTHS Recognised as specialist provider Good local reputation Local knowledge and accountability and focus Good track record of delivery and performance Committed Board members with wide skills and experience and effective governance Independent position Good reputation with partners and stakeholders Partnership working ethos Innovative support structure with efficiency of operation Good satisfaction levels amongst residents Strong support from local authorities High value stock in prime location Flexible and adaptable to change Financially secure OPPORTUNITIES Rural issues high on political agenda (locally, regionally,and nationally) Specialist development and management skills can be offered to others Management of rural stock for others Partnerships with local developers Alignment with Localism Agenda Other funding streams (New Homes Bonus, Community Led funding) Stock rationalisation by others Land owner willingness to engage New Planning Policy Framework Community Land Trusts WEAKNESSES Reliance on others (Development Agents) to deliver Narrow product and operational range Small organisation Cannot develop in own right Reliant on key staff covering wide-ranging tasks Reliant on specific planning policies Bound by sector rent structures Limited ability to influence in own right Risk averse Some aging stock which is expensive to maintain Stringent local criteria for stock in Peak Park Development costs in National Park high THREATS Rural issues lose priority status (urban bias)/government uncertainty Competition from others including private developers Reducing number of investment partners Failure to perform on service delivery and customer expectations Non compliance with regulatory framework Reducing capital subsidy and increasing costs Increased maintenance input/requirements Change in local planning policies Change to building standards impacting on costs. Reputational damage from service delivery failure Loss of Preferred Partner status Non-compliance with regulatory framework Reduced number of lenders and/or increasing margins Welfare reform and the impact on tenants incomes Low demand in sparsely populated areas imposition of Right to Buy 12

15 Item 4 CURRENT ACTIVITIES AND STRATEGIC FOCUS In order to achieve its objectives, it is necessary for the Association to concentrate its activities in areas that will deliver the required outcomes. This section of the plan identifies those areas, and explains how they will enable the delivery of the plan objectives. 1. Delivering Development and Growth The Association will continue to pursue organic development growth based on evidenced housing needs. However, the Association has recognised that demographic trends will impact on demand for its products and these will need to feed into the development strategy. That said, the Association will continue to adhere to the key aspects of its development strategy, which are: To develop new build schemes in villages, of not more than 3,000 people for the benefit of local people. It will consider schemes in larger villages and towns on their merits where they contribute to this primary aim. Opportunities to provide homes will be sought where and when proven housing need is brought to the attention of the Association. To encourage the discovery of housing need, the co-operation and support of Local Authorities, Parish Councils and rural communities will be sought. The plan assumes that some new schemes will continue to be delivered on exceptions sites and subject to Section 106 Agreements. Other units will be delivered as the affordable homes on larger developments. Increased emphasis will be given to exploring alternative mechanisms to meet local housing needs, and achieve the growth ambitions identified in this plan. This includes cross-subsidy arrangements, planning gain options with developers, acquisitions from other providers resulting from stock consolidations, and increased investment on its own resources. The views of the Parish Council will always be sought and all actions will be taken to secure their support throughout the development process. Considerable care will be taken to ensure its developments are in harmony with the existing village architecture. 13

16 The Association has a clear focus with regard to where it will promote new development, and on what basis. Surrounding this, however, are specific activities that will always be an integral part of the development process, namely: a) Emphasis will be maintained on keeping Parish Councils, landowners, District Councils and the funding agencies informed and updated on development progress. It is recognised that the nature of such schemes, with significant involvement from those at a local level, will involve a process of updating on a regular basis. b) Where the procurement process allows, PDRHA will consult with Parish Councils on scheme layouts and design proposals, with a view to co-sponsoring any planning application. The Association will also explore alternative construction techniques. This includes the use of modern methods of construction (MMC) and off-site manufacture. While the Association s growth objectives will primarily be achieved through developing new homes, growth through formal partnerships with other organisations will not be ruled out on the basis that the organisations key aims, objectives and values are not compromised. This may involve engagement with local Almshouse societies; local landed estates; and developers. However, such opportunities will only be pursued where it is financially viable to do so, and there are strategic or operational gains in relation to business. To summarise, in respect of its development and growth activity, PDRHA will, over the Plan period; Pursue developments on exception sites or through similar planning mechanisms. It will pursue available opportunities for procuring affordable units on development sites. Increasingly look to the use of cross-subsidy arrangements, consider acquisitions from other providers, and increase investment of its own resources, including RCGF to pursue its growth objectives. Aim to deliver a minimum programme of 48 dwellings in the Plan period, subject to funding availability (both public and private) and viability being achieved. Where feasible, PDRHA will progress environmental exemplar projects, and develop good practice examples with a view to promoting this activity to others. 14

17 Actively look for opportunities for partnership arrangements to achieve its growth objectives where its key aims, objectives and values are not compromised. 2. Service delivery to residents As a manager of property, PDRHA aims to provide excellent services to its residents, and will strive to improve this service when opportunities to do so present themselves. The Association remains committed to engaging with residents over the services it provides, and is enhancing its mechanisms to achieve this, including the increased use of social media. This includes regular review of its website; continued development of a Facebook page; utilising Twitter and publishing a regular e-zine. We have proven resident engagement structures to enable scrutiny of our performance. This is primarily via the Resident Involvement Board in conjunction with our partner RHAs. The PDRHA Board also receives annual reports in relation to resident complaints, satisfaction with new homes, and Customer Care performance. Alongside this, the Association will develop approaches to enable increased member engagement with residents to improve local accountability. The Association has set clear targets against which it will monitor its Housing Management performance. To this end, it has adopted a set of Performance Indicators. These indicators will not only be used as a measure to ensure effective management, but will also be used as a management tool to assess where improvements, for the benefit of residents, can be made. Performance against these indicators will be subject to regular review by the Board. In this regard, the Association recognises that the regulatory obligations in relation to resident involvement may change as a result of the proposed Housing Green Paper. As a consequence, this aspect of the business is likely to be enhanced throughout the plan period. There are clear differences in management between the rural environment and the urban areas. Remaining sensitive to local circumstances and consultation over local connections are just two areas where PDRHA has significant experience and expertise. The Association recognises that these management skills are a resource that could be effectively deployed in the management of stock outside the Association s ownership. The Association will look for strategic opportunities to expand its management role with particular emphasis on managing stock for others where financially viable to do so where it presents benefits to residents, or where the management of such stock is likely to present future purchase options. 15

18 To summarise, PDRHA will, over the plan period: Provide high quality management, maintenance and customer care services to residents. Set clear Performance Indicators to monitor the delivery of services. Continue to widen the membership of the Resident Involvement Board, and identify options for increasing Board member engagement with residents. Promote itself as a skilled manager of rural stock and expand this element of the business where it has strategic value; is financially viable to do so, and where stock ownership opportunities exist. Enhance its engagement commitments with partners through increased use of social media. Ensure all residents data is fully secured and usage complies with GDPR requirements. 3. Asset Management The Association has a formal Asset Management Strategy, which is subject to annual review. Through the implementation of the Strategy, the Association aims to improve the quality of life and environment for its customers and ensure its homes are maintained in a safe condition. The Strategy sets out how the Association will maintain its stock at Decent Homes Standard by the effective programming of works. Such works will be discussed with residents as part of our on going commitment to consultation. We will ensure that realistic and deliverable budgets are set for planned maintenance over the life of the Business Plan. Such budgets will be formulated with reference to current rent reductions, and any future rent control mechanism. The Association remains committed to minimising the effect of climate change and improving our stock for the benefit of the environment and our residents, and this will be a clear objective over the life of the plan. In this context, over the plan period, PDRHA will: Annually review the Asset Management Strategy. Maintain its stock in good, safe, condition to ensure all homes meet the Decent Homes Standard. Liaise with our residents over any proposed planned maintenance or improvement work. Fund a planned programme of repair work based on realistic and deliverable budgets. Invest resources to improve running costs for the benefit of residents. Ensure compliance with all health and safety obligations, and monitor performance against key indicators. 16

19 4. Financial planning Peak District Rural Housing Association (a) Assumptions on Development Activity It is highly unlikely, in the current fiscal and funding environment, that new projects will be viable in their first year of management. This is the result of increasing costs and building requirements and limited capital subsidy. This position has been exacerbated by rent reductions imposed by Government until In these circumstances a considered decision will be made on scheme specific revenue losses, and capital contributions, and their impact on the Association s financial resources. In addition, the Association has a responsibility to ensure that its expenditure on long-term finance commitments can be met, and that there is sufficient provision for management and maintenance costs and long-term major repairs. Delivery of these key business objectives is a major consideration in deciding on the level of the Association s own resources to be invested in new development projects. At the time of preparing this Plan, the Association had secured grant funding as part of the Home England affordable housing development programme for This was supplemented with funding from specific local authority partners. This funding, alongside private finance raised from more efficient asset security and utilisation of the Association s own resources, will support the Association s growth aspirations during this period. Based on current level of development programme, the following unit completions are anticipated for the plan period: (i) At the end of 2017/18 the Association had 266 homes in management, including those managed for other Housing Associations. This is the baseline figure for the commencement of the plan. (ii) It is anticipated that 1 home will complete in the first year of the plan (2018/19). (iii) The number of completions achieved in the second year of the plan is anticipated at 13. The number of completions achieved in the third year of the plan is anticipated at 18. (iv) Completions for 2021/22 and 2022/23 are anticipated figures based on the completions achieved in the first three years of the plan. 17

20 b) Assumptions on staffing and running costs The staffing resources required to run the operations of the business will be provided by Midlands Rural Housing. Midlands Rural Housing will meet its obligations utilising staff from its office located in Coalville, Leicestershire, and this will remain the base for staffing resources for the plan period. The Association, in conjunction with its partner rural Housing Associations in Warwickshire, Leicestershire and Northamptonshire, jointly employs the staff within MRH. These costs are directly related to the time involved in running the business of the Association, and are regularly adjusted to ensure the contribution to salaries and overheads is fair and appropriate. We recognise that as our stock and activity base continues to grow, and the management of income becomes more demanding, we will need staff resources to support it. This will be addressed by increased resourcing within Midlands Rural Housing, in conjunction with the partner RHAs. However, such resources must be readily accommodated within the financial plans of PDRHA and the partner RHAs in manner that does not adversely impact on individual viability, and still demonstrates value for money. 5. Risk Management PDRHA recognises the importance of establishing a risk management framework, and a formal risk map has been developed as part of this process. A summary of this is attached to the plan at Item 6, Appendix 3. As part of the adopted framework, there is regular reporting of emerging risks to the business in order for the Board to take ownership of the process, and there is a periodic review of the Association s risk appetite. With regard to this latter aspect, the Board has previously confirmed that the Association has a moderate approach to most risks, but remains cautious when it comes to finance and growth. Alongside this, it is more open to the risks associated with service delivery and supports innovation in this area of the business. 6. Incorporating Community Cohesion into our Core Activities The Association provides more than just homes. Our activities contribute to sustaining rural villages as cohesive and vibrant communities. By providing much needed homes for local people, who contribute significantly to their neighbourhoods, the benefits are not just 18

21 to those housed but to the community as a whole. While this is often seen as added value to what we do, we want to ensure that these benefits are embedded as core objectives. In this context, the Association will endeavour to increase its commitment to, and investment in, community development activity. In particular, we will: Work with other agencies committed to community development in rural areas to ensure our contribution is part of a co-ordinated approach and not an isolated activity. Ensure that our homes are designed to environmental standards that benefit residents by controlling utility costs and reducing fuel poverty. Look for opportunities in the villages where we work to improve economic and social viability; for example, utilising local skills in development, social enterprise and maintenance activities, and contributing to community infrastructure projects. Contribute to local support services that actively tackle social exclusion, and contribute to maintaining people in their communities. Undertake an assessment of specific development projects to establish the social and economic return on investment associated with the provision of such homes. That said, we recognise there needs to be buy in from the communities themselves, and much of our involvement will need to be led by the communities in which we work. 7. Governance and Board Control The Board of PDRHA will ensure its activities are accountable. It will determine strategic direction of the business; oversee the management of risk, and ensure the Association adheres to its aims and objectives. Specifically, during the plan period, the Board will look to: 1 Promote engagement and communication opportunities with residents with a view to increasing Board accountability. 2 Ensure compliance with the NHF Code of Governance and ensure arrangements are in place for Board member succession recruitment and renewal in accordance with the adopted Succession Plan. 3 Ensure proportionate compliance with any regulatory framework. 4 Ensure all members are sufficiently trained, briefed and engaged to act as advocates for our work, and are able to act as a bridge between the organisation and the outside world. 19

22 5 Ensure a proportionate appraisal process is in place for Board members, and learning and development needs are identified. 6 Keep under review the Board meeting and agenda structure to ensure members are able to consider and debate wider strategic matters in the context of the Association s business objectives. 20

23 Item 5 FINANCIAL ASSUMPTIONS In order for PDRHA to achieve its development and growth objectives, access to private lending sources is crucial, and such money can only be secured if adequate security is available. In this respect, the Association has a clear Treasury Management Policy and Asset Register, which is subject to regular review. The Treasury Management Policy identifies how the Association will raise the necessary finance to support its developments and which sources and terms will be utilised. It also deals with the Association s approach to interest rate exposure. Attached to this section of the plan are the assumptions used in the financial planning process and the anticipated income and expenditure profile for the period. These demonstrate that the Association has the resources to fulfil the aspirations set out in this Plan. Details are as follows: Appendix 1 - Assumptions on Unit Completions Appendix 2 - Assumptions on Houses in Management Appendix 3 - Other Assumptions Appendix 4 - Income & Expenditure Forecast for the Plan Period Appendix 5 - Balance Sheet for Plan Period. 21

24 Appendix 1 FINANCIAL PLANNING ASSUMPTIONS COMPLETIONS Completions Achieved In Arising from: Existing and forecast Development PLAN PERIOD Year 1: 2018/19 Year 2: 2019/20 Year 3: 2020/21 Year 4: 2021/22 Year 5: 2022/23 Location Units Location Units Location Units Location Units Location Units Hulland Ward 1 Winster Taddington Marston Montgomery Wetley Rocks Tansley Hartington Hulland Ward 8 Unidentified 8 Programme TOTAL

25 Appendix 2 FINANCIAL PLANNING ASSUMPTIONS HOUSES IN MANAGEMENT PLAN PERIOD 2018/ / / / /23 Houses in Management at start of year New completions Total houses in Management at year end

26 Appendix 3 FINANCIAL PLANNING ASSUMPTIONS FOR THE PERIOD ENDED 31 st MARCH / / / / /23 INFLATION INDEX Consumer Price Index 2.80% 2.25% 2.25% 2.25% 2.25% al Income -1.00% -1.00% 3.25% 3.25% 3.25% Staff Costs 1.50% 3.25% 3.25% 3.25% 3.25% Routine Maintenance -1.00% -1.00% 1.00% 2.00% 2.00% Planned Maintenance 13.00% 3.00% 10.00% 2.00% 1.00% Other Expenses 0.00% 2.25% 2.25% 2.25% 2.25% FUNDING COSTS Bank Base Rate 4.50% 4.50% 4.50% 4.50% 4.50% Margin on new bank debt 2.50% 2.50% 2.50% 2.50% 2.50% RENT LOSSES Voids 1.25% 1.75% 1.75% 1.75% 1.75% Bad Debts 2.75% 3.75% 3.75% 3.75% 3.75% 24

27 PEAK DISTRICTSHIRE RURAL HOUSING ASSOCIATION INCOME & EXPENDITURE FORECASTS Appendix (4) /23 Income From Lettings Receivable Existing Units 895, , , , ,547 New Units 1,447 40,243 98, , ,686 Service Charge Income 37,181 38,018 38,873 39,748 40,642 Gross al Income 933, ,376 1,060,146 1,122,821 1,185,875 Less Voids (15,367) (22,046) (23,695) (24,961) (26,236) Amortisation of Government Grant 87,114 87,551 93,818 98, ,101 Management Charge Income 70,880 70,690 72,503 74,580 76,692 Total Turnover From Social Housing Lettings 1,076,455 1,110,571 1,202,772 1,271,291 1,337,432 Management Costs 182, , , , ,202 Service Costs 39,650 40,542 41,454 42,387 43,341 Routine Maintenance 137, , , , ,039 Planned Maintenance 56,964 60,076 68,392 71,059 72,882 Bad Debts 33,692 47,242 50,775 53,487 56,221 Depreciation Of Housing Properties 229, , , , ,063 Total Operating Costs 680, , , , ,748 Surplus (Deficit) On Social Housing Lettings 395, , , , ,684 I&E from Other Activities 4,060 41,528 52,150 9,100 26,250 Surplus Before Interest and Tax 399, , , , ,934 Interest Collected Interest Payable (328,711) (356,013) (381,468) (402,352) (424,272) Surplus Before Tax 71,559 90, , , ,855 25

28 PEAK DISTRICTSHIRE RURAL HOUSING ASSOCIATION BALANCE SHEET Appendix (5) HOUSING ASSETS Housing Properties at cost 18,504,344 18,977,315 20,907,528 22,070,428 22,668,027 Depreciation (1,871,670) (2,103,543) (2,353,908) (2,618,354) (2,890,417) Total Fixed Assets 16,632,674 16,873,772 18,553,620 19,452,074 19,777,610 Current Assets Cash 634, , , , ,000 Other 201, , , , , , , , , ,095 Current Liabilities (270,455) (270,455) (270,455) (270,455) (270,455) Net Current Assets 565, , , , ,640 Total Assets Less Current Liabilities 17,198,110 17,113,618 18,754,260 19,652,714 19,978,250 LONG TERM LIABILITIES Loan Balance 5,703,453 5,525,871 6,362,749 6,847,947 6,913,729 Government Grants 9,129,102 9,131,551 9,897,733 10,208,882 10,327,781 Pensions Liabilities 83,905 83,905 83,905 83,905 83,905 RCGF 180, ,781 90,781 90,781 90,781 NET ASSETS 2,100,869 2,191,510 2,319,092 2,421,199 2,562,054 Capital and Reserves Share Capital Retained Surplus 2,100,829 2,191,470 2,319,052 2,421,159 2,562,014 2,100,869 2,191,510 2,319,092 2,421,199 2,562,054 26

29 Item 6 BUSINESS PLAN APPENDICES 1. Board Membership 2. Stock Profile 3. PDRHA Operational Risks 27

30 1. BOARD MEMBERSHIP Appendix 1 The Board of PDRHA comprises representatives from Local Authority partners, RSLs, and Residents. In addition, there are a number of individual representatives who bring a significant range of skills and support to the Committee. A regular Skills and Experience audit is undertaken to ensure the range of experience and knowledge remains relevant to the Association s business, and the Association s operations are fully compliant with the NHF Code of Conduct. The following were members of the PDRHA Board at the time the Plan was issued: Mr David Frederickson Chair Mr Philip Sunderland Vice Chairman Mr Ian Fullilove Independent Member Independent Member Co-optee (Peak District National Park Authority) Former District Councillor Auditor Planning Officer. Anne Croasdell Co-optee Secretary of Youlgrave Community Land Trust Mr Jonathan Jenkin Independent Member Planning Consultant Mr Ian Sharpe Independent Member Retired financier. Mr James Lunney Independent Member Retired Housing Association Chief Executive Mr Simon Beynon Independent Member Housing Advice Manager with Derbyshire Dales District Council 28

31 Appendix 2 Derbyshire Dales 2. PEAK DISTRICT RURAL HOUSING ASSOCIATION STOCK PROFILE Village Address No Mix Tenure Bakewell Miracle Court 6 6 x 2 bed flats Bakewell New Street 12* 9 x 1 bed flats 2 x 2 bed flat 1 x 1 bed bungalow Baslow Low Meadow 10 1 x 3 bed semi detached 1 x 3 bed semi detached 1 x 2 bed semi detached 1 x 2 bed semi detached 4 x 2 bed bungalow 2 x 2 bed bungalow Shared Ownership Shared Ownership Shared Ownership Bonsall Yeoman Street 1* 1 x 2 bed terraced Brailsford Saracens Court 2 2 x 2 bed semi detached Shared Ownership Brassington Green Way 1* 1 x 3 bed semi detached Calver Brook Close 4 4 x 2 bed semi detached Cromford Hawthorne Drive 1* 1 x 3 bed semi detached Cubley Long Meadow 6 2 x 1 bed bungalow 2 x 3 bed semi detached 2 x 2 bed semi detached Darley Dale River View 1* 1 x 3 bed semi detached Two Dales Ryecroft 1* 1 x 3 bed terraced Earl Home Farm 5 1 x 1 bed terraced Sterndale 3 x 2 bed terraced 1 x 3 bed terraced Elton Alice s Cottages 11 1 x 2 bed bungalow 1 x 2 bed bungalow 1 x 3 bed semi detached 1 x 3 bed semi detached 2 x 2 bed semi detached 1 x 2 bed semi detached 4 x 3 bed terraced Kniveton The Hallsteads 1* 1 x 3 bed terraced Longford Sepycoe Lane 3* 3 x 3 bed house Rowsley Chatsworth Road 1 1 x 3 bed terraced Snelston Ash Tree Cottages 2 2 x 2 bed semi detached Hulland Ward Charles Walker Close 10 4 x 2 bed bungalows 6 x 2 bed bungalows Hulland Ward Biggin View 8 2 x 2 bed semi detached 2 x 2 bed semi detached 2 x 3 bed semi detached 2 x 3 bed semi detached Tansley Alders Field 2 2 x 3 bed semi detached Tansley Thatcher s Croft 13 4 x 2 bed semi detached 2 x 3 bed terraced 5 x 3 bed terraced 2 x 2 bedroom flats Kirk Ireton Hardings Close 4 1 x 3 bed semi detached 1 x 2 bed bungalow 1 x 3 bed semi detached 1 x 2 bed bungalow Shared Ownership Shared Ownership Shared Ownership Shared Ownership Shared Ownership Shared Ownership Shared Ownership Shared Ownership Shared Ownership 29

32 Appendix 2 Village Address No Mix Tenure Stoney Lime Kiln Cottages 3 3 x 2 bed terraced houses Middleton Over Haddon Bakewell Road 2 2 x 2 bed semi detached Youlgrave Hannah Bowman Way 8 1 x 2 bed detached bungalow Shared Ownership 1 x 3 bed terraced house Shared ownership 1 x 2 bed terraced bungalow 2 x 2 bed terraced houses 3 x 3 bed terraced houses High Peak Village Address No Mix Tenure Castleton Peveril Close 4 2 x 2 bed semi detached 2 x 2 bed bungalow Chinley Alders Meadow 10 6 x 2 bed terraced 2 x bed bungalow 2 x 3 bed semi detached Edale Water Meadows 2 2 x 3 bed semi detached Shared Ownership Hope Castleton Road 4 4 x 2 bed terraced North East Derbyshire Village Address No Mix Tenure Ashover Malthouse Lane 6 2 x 3 bed terraced 4 x 2 bed flats Shared Ownership Holymoorside Old School Close 8 3 x 2 bed bungalows 3 x 2 bed semi detached 2 x 3 bed semi detached Shared Ownership Holymoorside Belmont Park 4 2 x 1 bed flat 2 x 2 bed flat Sheffield City Council Village Address No Mix Tenure Low Glebe Court 8 6 x 2 bed terraced Bradfield 2 x 3 bed terraced South Derbyshire Village Address No Mix Tenure Repton Longlands 12 2 x 2 bed bungalow 4 x 3 bed semi detached 4 x 3 bed terraced 2 x 2 bed terraced Shared Ownership Shared Ownership 30